The Bottom Feeders

They had a kick-ass product, cash in the bank, and eager customers. In the scrappy world of Silicon Valley start-ups, they were about to be eaten alive.

It's a little after 8:30 p.m., Thursday, the fourth day of Comdex, when I step over the threshold of a beige hotel suite a block off the Vegas strip. Inside, two of four load-bearing walls are shored up with reams of scattered papers and brochures, boxes heaped with CD-ROM drives and metal cases, travel bags, day planners. A PC and monitor sit idle on a tiny desk; a laser printer dwarfs a TV gleaming with the flickering images of CNN. Amid it all, the three principals of Intaglio lounge about shoeless, shirttails out, smoking cigars.

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They are Silicon Valley's native sons, flushed and spent after their third straight day on the cacophonous and exhausting show floor. They've been sweating the game in khaki pants and light-blue, button-down oxfords, hamming it up with an endless stream of passersby like there was no better place to be than trapped on a 4-foot-square patch of carpeting with only one chromed low-back bar chair to catch your breath upon.

They have picked the hard road, littered with the wreckage of yesterday's technological also-rans. At each step, Father Failure stares them down, daring one to blink.

Beyond the sobering fact that the majority of all small businesses fail in their first year, the current market climate definitively favors new online tech ventures to those companies that build nuts-and-bolts hardware. But armed with a new CD-recording system, Intaglio's three employees see the window of opportunity; they know they're right. And once they get their product to market, they figure everyone else will realize it, too.

In the Vegas hotel room, Dave Anderson is slouched back on the couch, cradling a beer while studying the stogie in his right hand. His short blond hair frames 30-year-old eyes, clear-blue placid and set perfectly in his languid poker face. Dave is Intaglio's president and the engineer behind the company's baby: a CD-R system that can be hooked to a network. This is his third start-up and best shot at finally making an industrial-level splash. As Intaglio's architect, Dave is the one up at 4 a.m., still puzzling over how to get tab A to fit into slot C without the part B every ounce of sense tells him he needs yet can't afford.

Loitering by the PC in slacks and an undershirt, Jim Toreson relishes the tattered rump of tobacco stuck between his fingers. Jim is Old Valley – the veteran dealmaker. Back in the mid-1980s, he sold IBM on the idea that PCs should come equipped with hard drives, leading his company, Xebec, into a US$200 million contract to build hard-drive controllers for the PC XT. But by 1990, Japanese competition effectively squelched Xebec. Now in his early 50s, he's back with Dave, whom he met years ago on a job doing circuit-board assembly. This time around, he's here to help Intaglio find the money it needs to grow.

Across from Jim, his bare feet propped on the corner of the coffee table, Chance Curtiss muses with a quiet smile on his face. Chance is. He's the liquid filling every vacancy: the marketer, salesperson, CEO. He abandoned his one-man advertising agency a year ago for the promise of greener pastures with Intaglio. A sturdy San Jose, California, native in his 20s, Chance reeks of confidence, fat with the knowledge he has gathered on Intaglio's market segment and ready to pound chests with anyone brash enough to stand in the way.

Together, the trio is on the verge of building a new business – and a new business category – exploiting a mid-range market that current CD-recording technology cannot touch. This grand plan has percolated for the past year, but now, with a $5 million investment to ramp up production only a few formalities away, the product will soon materialize, complete with manual and price tag. Banks, publishers, the CIA, and Sega have seen it demo'd and want it. In a few months, Intaglio will move its offices to the NASA Ames technology incubator in Sunnyvale, California. All that remains is to wrap up development, find manufacturing partners, and wave the system around in the air to attract more customers.

They have no idea what's about to hit them.

Parallel sparking

Intaglio's origins stretch back to the days when CD-recording was solidifying its market niche. Despite the technology's flexibility for recording discs in multiple formats – music, CD-ROM – finding the equipment suited for your particular job was difficult. You had only two options: burn one disc at a time with a recording drive connected to a PC, or go to a professional duplication house and have hundreds of discs pressed. For medium-sized runs of 50 or 60, neither option made much sense.

Then the Italian firm Alea Systems built a model that could record four discs at a time. Back in early 1994, Dave and Jim were working together on a number of circuit-board assembly jobs through Dave's second company, Modern Production and Processing. The question Jim posed to Dave was simply: How do you record more than four CDs simultaneously? Dave started gnashing mental gears.

Years back, Dave was a quality control engineer for AT&T, setting up and troubleshooting complex computer systems. But fear pushed him out. Getting lost in a large company was so easy, Dave didn't feel he had a shot at doing what he wanted. So he left and started Modern Production and Processing, which folded after investor trouble. Then he began ACE, contracting custom-engineering jobs. Cut-and-dried 9 to 5 wasn't his style. Doing contract work was perfect for him in some ways: sit down, figure out the problem, solve it, and move on to the next puzzled client. Intaglio is a big shift for him: making the move from providing engineering services to building a business around a new product.

With Dave, engineering the CD-R system wasn't a question of testing, experimenting. He sat, he thought the problem through, then he put it all together in his head. The question was not whether the product was possible, but whether he could find the right parts.

The Intaglio CD-R 2000 is his creation: a scalable network of CD-R drives that burn in parallel. It will connect to a LAN, offering the ability to sit at a computer, download data, and let the system shuttle the information to the recording drives – simultaneously burning as many CDs as there are drives available. It's perfect for short runs of discs or data that is updated often, like software betas, sales presentations, archives.

Back in mid-1994, armed with little more than some mental diagrams and a few patent applications, Dave called on F&S Investments, a group of investors from Los Banos, California – not your Sand Hill Road VC types, but mainly agricultural folks with an eye toward investing in their techno-goggled Valley neighbors. Through his engineering company, ACE, Dave managed to wrangle $400,000 in seed money for research and development. The bundle was used to start Intaglio.

Now that the hard part – conceiving the product and getting money to build it – was done, the next step was finding someone for marketing and sales.

Chance arrived one day to give Dave a marketing presentation for Modern Production and Processing, and their rapport gelled quickly. Chance later did marketing work for both of Dave's engineering companies, and ultimately he came aboard to help sell Intaglio.

I met Chance three years ago, amid a mass of cubicles in the media planning department of a San Francisco advertising agency. The first thing I noticed about him was his unique decorating style: paper cutouts of fish taped on the dividers around his desk and the "Wheel of Meat," a large, four-color, cardboard T-bone steak that spins around, stopping on phrases like "Smoke break!" and "Go punch Chris in the ribs!"

Chance has this lovable, nutty uncle gene. So while he radiates a sunned, California business-type on first impression, after a closer look you can't help but picture him telling stories to his nieces and nephews on the back porch. It's an aura, if you believe in that sort of thing. For every conversation, Chance has another odd anecdote – arcane historical trivia to fit the situation. It's not so much who's on the other end of his spiel as it is getting into the guy's office.

This makes him the perfect person to market Intaglio. But while the product's uniqueness is its greatest selling point, trying to explain its potential in the CD-R marketplace has proven to be Chance's biggest headache. "We're creating all the research in this area," he explains. "We had to piece together five or six different things to get an idea of what this market's going to be like." And buying research from a reputable firm turned out to be too costly. "Commissioning a target-market analysis would cost about a half year's worth of sales. So you have to do your own research; borrow Dataquest's and IDC's stuff. You just can't write a business plan without good research."

Chance then went ahead and did too good a job of advertising and promoting Intaglio. As Dave explains it: "I had orders I couldn't produce. That's a very funky problem. Usually, you've got the product developed, and you're out begging to get sales."

This pushed the trio into searching for first-tier money to ramp up production before the product was completed. What's left of the seed money should keep Intaglio running for the near future, but it won't last long. It has been earmarked for development, procuring parts, and contracting out for the software. Add in trade shows, marketing and advertising expenses, and, lastly, salaries. Luckily, Dave has been able to convince other manufacturers of Intaglio's potential, and they have provided help and hardware components, betting that contracts will come along once Intaglio is on its feet.

One of those gamblers is why Intaglio is at Comdex. Yamaha, one of the largest makers of CD-R drives, has asked Intaglio to demonstrate its CD-R technology in the Yamaha booth at the Sands Expo & Convention Center. Intaglio, for its part, hopes that once production begins, it can begin ordering Yamaha drives. But this week, the Intaglio threesome is simply concentrating on leveraging the exposure into new customers and some manufacturing partners while spreading the Intaglio name and perhaps whipping up a little hype.

The computer circus comes to town

By the time the Sands is in my sights Friday morning, the desert wind has leached away most of my fluids. Then I get a whiff of the air inside the hall: sweat, bad breath, and the wind of a thousand hucksters. Walking up to the sprawling Yamaha booth, I see Chance and Dave in blue Yamaha-logo oxfords (everyone in the booth wears them), standing at their post. Jim has disappeared, probably off scoping the show. It's only 11 a.m., but their eyes have already begun to glaze.

Intaglio's space is little more than half a table at the carpeted edge of the booth. The prototype CD-R 2000 sits inconspicuously next to a monitor displaying the Windows recording software. It's a small box, 18 inches long and 7 inches high, painted IBM gray and housing five Yamaha CD-R drives. Dave has set up the software for mock burns: every 15 minutes, five caddies pop out of the unit, representing five freshly minted discs. To the uninitiated, it's a surprisingly unimpressive display.

Then you notice the other CD-recording designs. Next to Intaglio, a company is demonstrating a CD-R jukebox. It looks like a dishwasher with a clear Plexiglas face. Inside, two metal arms slowly shuttle discs in caddies from a tall stack to the recording drive at the bottom. It's big and bulky – and it records serially, not in parallel like Intaglio's offering.

Surrounding us, laid out farther than I can see, are booths full of products and their enthusiastic hawkers. The great ideas are here. Somewhere, tucked amid the bazaar of 3-D graphics accelerators and the surround sound computer speakers, is The Next Big Thing.

Intaglio got lucky: Yamaha's sponsorship cradles the little company in legitimacy. The rest must fight it out on the main floor with color photocopies and signs taped to card tables. Only the lettering of the company's name distinguishes one product from the next.

But they all come, every year, everywhere. From SIGCAT to AIIM to Comdex, Intaglio has shown up to tout its product and generate excitement. Though the shows are loud, crass, and expensive, they are the easiest way for a small company to grab the ear of industry. It's a necessary evil in Chance's and Dave's eyes.

"Trade shows are the biggest moneymaking scheme in the history of mankind," Chance preaches. "You've got these guys charging you for everything – 60 bucks a chair for a day? We got our first chair down at SIGCAT – and a free plant! They just left it there."

"At AIIM, the first show we went to in San Francisco, they make these union guys drag in your equipment, even if you can carry it yourself," Dave explains.

"You can only carry it with one arm," Chance adds, waggling a finger at me. "That's the rule."

Dave's lips purse as he shakes his head. "They ding you for everything: dropping an electrical outlet, the lead generators. On top of that, they scratched our system bringing it in. There was a 2-foot scratch down the side of the box."

"So, not only do you have to worry about building it and getting it there," Chance continues, "but by the time these gorillas have handled it, you have to make sure it still works. It's not as if we've got a warehouse of working product. We've got one. We've got R2D2. Nothing can happen to him."

While we've been talking, a gentleman has sidled up shyly to R2D2 and peered around the back, apparently trying to discern where Intaglio hides all the razzmatazz. Dave and Chance move in and strike up the tech talk.

You don't have to go far to see why the gentleman was confused by Intaglio's lack of panache. Fifteen yards away, a monitor company demonstrates the toughness of its tubes. A croquet mallet is poised a few feet above the screen. Every 30 seconds or so, the mallet drops, swinging down until its head smacks the glass. The sound pierces your ears and continues down into your gut; and I don't see anyone who can stand it for more than a few seconds.

After 2 miles of meandering and stuffing pounds of slick brochures into a plastic bag, I circle my way back to Intaglio's booth. Jim has finally shown up and is easily shooting the breeze with a gray-suited gentleman.

To Dave and Chance, Jim is the one who can do what they cannot. In their eyes, Jim's been there, done that; kicked ass, taken names. Chance tries to use Jim's experience however he can. The night before I arrived in Vegas, Chance and Jim railed around their little hotel room, arguing business philosophy for almost an hour. Hearing about it, I'm worried that pressure (or maybe decompression) is taking its toll.

Chance begins to shake his head. "It's a game," he says. "Jim was going on about his great experience, and I said, Well that's fine, but I really want to do this now, and I know it's gonna work. Jim bites back and that's fun. I take the opposing side, well, because I can." That is Chance somehow, always looking around to gauge whether he's holding his own while spouting some strange and incomprehensible stream of bullshit.

But unlike Jim and Chance, Dave is not cut out for this kind of schmoozing. That's the one thing his eyes betray. As he says himself, sadly, after all his previous endeavors, he's becoming numb to the adventure – it's just business now. "You gain this subconscious attitude not to trust anyone," Dave says. "When I walk into a meeting now, I'm thinking, How is this guy gonna screw me?

"My first partner sued me. For four months we both tried to find funding, then he went and got a job somewhere else. When I got money, he came back and sued me for back pay. I guess you're not really in business until you've been served papers."

He actually laughs at me. "I get a kick when someone says, Do it out of your garage. Well, that would be OK, except that people just rip off your ideas. There are no business ethics anymore."

He's right. The old hardware start-ups like Apple and HP that form the core of the West Coast entrepreneurial mythos would never make it today. IBM would squash them like bugs. The cost of entry for building hardware is so prohibitive that when you finally raise the pile of money needed to get going, you've lost the flexibility that was your only advantage.

A small window of opportunity exists for any new idea, and the clock starts ticking once you describe the product and word begins to spread. Intaglio would be much more vulnerable were it not for a pending $5 million IPO Jim has been working on with Rickel & Associates, an investment bank based in New York. Nobody cares who first came up with a great idea – it's the company that turns it into money that gets the accolades.

I ask about the Rickel deal. That investment should have Intaglio building product in a few months. Dave looks at me and his eyes have suddenly gone totally black. "Yeah, maybe. But until the checks clear, I really don't want to hear about it."

The Rickel deal is the brass ring Intaglio's been reaching for all along. It will provide the cash flow to run the operations, fund the sales and marketing efforts, and get product to the appropriate channels. Once orders can be filled, the money will start pouring in.

When Dave took his new bride to Antigua in August 1995, he handed his two partners a 50-pound box of Intaglio's intellectual paper trail. Jim and Chance spent a week frantically burrowing through it, and at the end of that week, the two had rigged up a business plan that outlined the future of Intaglio's CD-duplication system.

Jim then hopped a flight to New York on his way to a Caribbean vacation. He dropped off Intaglio's business plan at Rickel & Associates and promptly reversed course, striking out for the beach and some family time. Jim's tactics were risky. The rule book dictates that you spend a few hours wrestling over numbers and dancing on large mahogany tables in colorful tap shoes. Jim has read that book, but from his perspective, sometimes you need to play your card hard and walk away without looking back. The gamble worked. In early November, the bank called with a card of its own.

Rickel was looking to help Intaglio raise $5 million to ramp up production, provided the product was finished and the first order was filled. The method? Intaglio goes public in six months.

"They want to make a Netscape out of us," Chance says. "And by that time, the company will have sold only a few units."

It's difficult coming to terms with the fact that while all the love and sweat you'd poured into the venture helped, what drives a company is money. And the money people are solely concerned with taking the Intaglio three to the Wall Street crap table and rolling a year of their lives down 2 yards of green felt going for a hard eight.

"I mean, we're building this boat in our house, and then we figure out that that's not the best place," Chance says. "So we take it apart and move it down right next to the water. Now, it's almost done. We want to put it in the lake and see if it floats. But they aren't gonna let us do that. Hell, at least let me fill it up and see if it leaks."

But as a small start-up with negligible cash flow, you make concessions. When a suitor calls – as long as the money is green and the checks clear – you sit down and you listen.

In the face of $5 million and the impending birth of Intaglio as a viable business, each of the trio's motivations are clearly muddled. At any given time, it's the product, the money, the thrill that drives them. But entrepreneurship flows freely underneath the emotions. Not a scrape-together-a-few-percentage-growth-points-a-year business as usual.

Dave and Chance make it clear that the liabilities involved in building a business with inventory and employees would kill them.

"The average big company is on a 9- to 18-month product cycle," Chance explains. "We'd like to be on a five-month cycle. We can't sit around for 18 months – we'd go broke. That's how we got into this virtual scheme: no employees, capital equipment, or overhead."

Today, what a small group of people can do is build a product – translate the intense firing of neurons into a creative package of steel, plastic, and silicon – then relentlessly hawk their freshly minted product to a marketplace that is salivating for anything new and improved. That's a business, and you unload it as fast as you can to some corporate behemoth that can actually afford to offer a health plan.

I walk the line

Friday evening, Jim takes us all out to meet Europe's Mr. Computer. While everyone in the States marks the age of the PC from the introduction of the Altair in Popular Mechanics in 1974, a small French-Vietnamese gentleman named Truong Trong Thi brought his Micral microcomputer to the US two years before anyone had heard of the Altair. For the next hour, Thi talks about some of his current consulting work: helping update Minitel technology, creating a document-imaging project for the Chinese government, and archiving the artwork and literature that managed to survive the Cultural Revolution.

In a place like the Valley, you have to know people – and people have to know you. Jim has started businesses, won, and lost them. That's what people remember – what you've done. That's why Dave and Chance look at Jim with reverence. Dave hasn't done anything noticeable yet – nothing to prove himself. "Once you create a successful company in the Valley," Dave says, "You become acquainted with this elite network – the decisionmakers."

Of course, getting that far is bound to involve stepping on a few egos. Dave revealed as much a week ago. "There's no win-win crap. Win-win is when the real winners have the losers convinced that they won, too, and the losers won't admit it because of their egos. It's respect, in a way, when a guy calls you an asshole, because that means you outsmarted him."

Jim filed a lawsuit in 1993 against the managers of Trillian Computer Inc., a Valley computer maker that folded three years earlier. Peter Redford, Trillian's former chief executive, would not comment on the case, but told the San Jose Business Journal that Jim left a trail of disgruntled associates. "Basically, he turns on everyone he deals with," Redford said. Jim knows the Valley, and the Valley, it seems, knows him.

According to Chance, who recently met with John Gee, the director of the NASA Ames incubator, Gee was wary of Jim at first. "He asked around and the VCs basically told him, Yeah, we know Jim, he's the guy who made all this money without letting us in on it," Chance explains. "Gee basically told me, Eighty percent of the people are going to say bad things, but then 20 percent are going to tell you this guy's a genius."

Later, Jim and Dave go back to the room while Chance and I head out down the strip. Outside, the sky is dark, the streets well lit. The tourists are running amok, and you can't tell anymore who's here for Comdex and who's on vacation, getting married, or just pouring their savings into the hotel water fountains.

We pause along the walkway that leads into the Excalibur, leaning over the edge of the wall to watch animatronic Merlin fight a big mechanical dragon, and I ask Chance what it's like dealing with the old Valley folk.

"The most important thing is selling yourself, which is a problem for Dave and me, being so young. We get dressed down by every old fart we meet. You may have 75 percent of the puzzle together, but these guys have been sitting behind desks, asking pointed questions for 20 years."

Looking up the Vegas strip, I imagine the suits somewhere having dinner. There's coffee, discussion, a few drinks. Intoxication leads to overconfidence and maybe a line is crossed in the back of a cab on the way to another casino. Oh, but it's a perfect match! Hard-nosed capitalism manipulates youthful exuberance; naïveté is conquered by experience. And in the deep of night, satin bedsheets are kicked off to reveal the hard numbers on the bare belly of a business plan. Maybe it's good for them, and maybe it's not.

Intaglio is lucky. The Rickel deal is clean-cut, all-American. It has its costs, like any IPO, but everyone retains their dignity. It is just business, after all. And now, leaving Comdex, the trio is simply happy that the hardest part is behind them. Each basks in a postcoital glow, just beyond the grasp of the writhing, hungry tendrils of this Babylonian enchantment around them: 7-Elevens on every corner – only with moats and big dragons that spout fire.

Perfection detection

For a period back in the Valley, Intaglio is lit like a sparkler. Comdex, while helping to solidify the company's relationship with Yamaha and to drum up customers, was almost a vacation. Now, it's time to clock back in. By the first of January, the company has moved its offices from San Jose's Techmart to the NASA Ames Technology Commercialization Center, a business incubator located just off Highway 101 in Sunnyvale. It looks like any office building, complete with a large parking lot, an outdoor court and fountain, soda machines, carpeting, and cubicles. But for a small venture like Intaglio, it's about as close to heaven as you get.

The Techmart, despite great name recognition for an office building, was draining Intaglio's coffers. Every little service had a price, and expenses were starting to add up. The incubator has as much recognition and a much friendlier atmosphere. Besides surrounding the venture with other whip-smart entrepreneurs, the space comes cheap: Intaglio's rent is $300. But beyond resources, which include a T1 line, the incubator functions as a one-stop tech shop. Big cats from the Valley and elsewhere can often be found touring the building, perusing the talent. If you're lucky, one of these deep pockets may call back and invest.

The new digs are a simple affirmation that Intaglio has been right – really right – all along. The director, NASA's Gee, has worked out a knowledge-sharing deal in which Intaglio can draw on Lawrence Livermore Laboratories for development assistance – not something that's handed out to everyone. And down the hall, Dave discovers a company that will save him at least six months of work. Virtual-Time Software Inc. has ported Microsoft Windows to a real-time operating system. Now, Dave can develop a single Windows interface for Intaglio's product and port it to both Windows and Unix machines – the majority of computer operating systems on the market.

But just as the dominoes are in place, Rickel bows out. Only Jim knows what happened – Chance and Dave feel Jim never completely filled them in on his dealings with Rickel & Associates. They know only that the calls stopped coming. When I finally get Jim on the phone, he explains that one of Rickel's clients blew the deal with a mere mouthful of words.

"We had gone ahead and thrown in some pricing in the business plan, showing growth based on those prices. The bankers sent it to a client, and that guy said that price was too high."

Thing is, this client completely misunderstood Intaglio's market, thinking its hardware was consumer-level, fit for Fry's or CompUSA. If you choose to subscribe to that fairy tale, then, yes, $5,000 to $10,000 per unit is too high. But nevertheless, in Jim's eyes, the damage was done. Making a comeback after a trusted Rickel client shot down the unknown Intaglio was impossible.

Surprisingly, Dave left the whole deal in Jim's hands, never speaking with Rickel, and he's generally bewildered about the entire episode. According to broker Greg Smith, Intaglio simply wasn't a good enough deal. The discussions he had with Jim were preliminary, and the minds at Rickel didn't see Intaglio's product as enabling technology – not hot enough.

Since then, Jim hasn't dug up another suitor, and Intaglio is beginning to drift apart. The seed money is all but gone, and no cash is coming in. The three have busied themselves pursuing consulting gigs on their own, hoping to stem the tide until Intaglio begins to hit on all cylinders again.

The $400,000 debt they incurred along the way is also beginning to loom. "Dave and I figured that having all of us together at the incubator would make us more of a unit, increase our effectiveness," Chance explains, a bit uneasy now. "That just isn't happening."

In February, the wind returns, billowing Intaglio's sails once again. The rumblings cease, and attentions focus on the task at hand – building CD-R equipment. Jim has managed to interest another potential savior: Mike McNeely, founder of Applied Materials, a large Valley semiconductor equipment manufacturer.

McNeely, now working on his own, has been bringing friends over to take a look at Intaglio. People are asking questions, and it looks like another investment group has been found. Chance and Dave are excited once again.

Dave, Chance, and I drive to lunch at the Fresh Choice down the road from the incubator. It's cafeteria-style salad dining on an automotive assembly-line scale. We sit down, and I ask what's up with Jim. Now that McNeely has taken the financial helm, Jim's position with Intaglio seems a little shaky. As it turns out, he has taken a job as COO at Apaq Technology Inc., a computer manufacturer in San Jose.

Why? "His wife is probably on him about bringing in money," Dave says.

None of them has seen a paycheck from Intaglio in more than a year. Jim has a family to provide for, which makes his defection understandable, but not any easier to swallow.

But Jim's new job makes him a wild card, and that's a problem. Up to this point, Intaglio has been built on handshakes. Dave and Jim share a patent on Intaglio technology, but sole ownership of the company and responsibility for repaying the seed money to F&S rests solely on Dave's shoulders.

Although Jim's job was to find financing for Intaglio, which he was unable to do, it's clear to Dave that Jim's participation was worth something – but how much? And McNeely? He has promised to outline what he wants from Intaglio during the following week.

For his part, Dave is concerned only with covering Intaglio's debt, securing Jim's position in Intaglio, and maybe procuring a little money with which to operate the company. "McNeely's participation will be based on what the investors need to solidify their investment," Dave explains. "If he has to act as CEO, so be it. If we have to search for a CEO or a CFO or marketing salesperson, we'll do that. I'm good at putting products together, but when it comes to the ins and outs of all the administrative and executive duties – even though I've got a good bead on it – I'm not at the level where I think my skill set would make me a good candidate." Meanwhile, R2D2 sits on a table, a bit forlorn, waiting for the last infusion of R&D money.

Slipped disc

In mid-March, the room that Intaglio shares with three other start-ups is quiet and empty. That is, all except for Dave, who is alone, tinkering with his R2D2. He's been slowly picking his way through the complex machine, tying up loose ends as he can.

Now that conversation has turned from engineering back to money, F&S is back in the discussion. As the original investment group, it is holding out against investing any more seed money, worried that Intaglio is too loosely held.

As Dave explains it, F&S is perfectly willing to provide the money to finish the product but needs to know where everyone stands as they go forward. That means sitting everyone down and clearly delineating their involvement and stake in the venture.

McNeely has drawn up a plan, outlining what he and Dave think are fair stakes in the venture. Part of the deal is buying out Jim, paying for his sweat equity. McNeely and the investors he's put together don't want Jim involved as Intaglio goes forward. They are scared of Jim and the bad part of his reputation. But after all he has expended for Intaglio, Jim isn't willing to walk.

Last week, after hearing McNeely's offered percentages toward an equity position and royalties, Jim countered with an offer of his own, which McNeely felt was unacceptable.

Dave believes he has taken all the risk up until this point. He owns the company and procured the initial seed money – he even engineered the product. Jim feels he's being unfairly forced out of Intaglio after setting up all the dominoes. "I got the company into the incubator and got McNeely interested," Jim tells me over the phone. "I got the thing started, and then McNeely kicked me out. They didn't want to treat me fairly."

McNeely asked Jim what it would take to remove him from a future management position in Intaglio and keep him satisfied. Jim asked what the offered percentages were attached to. He wanted to know the dollar figure of his stake. But since the investment McNeely put together wouldn't come through until after these negotiations, there was no money in the bank.

Now the talks have stalled, and the fate of Intaglio seems to depend on satisfying Jim – something McNeely and Dave aren't willing to cave in and do. Jim simply wants more of Intaglio than Dave and McNeely feel is rightfully his.

Chance, who can finally taste the finish line, is beside himself. "Jim, in his own words, said, 'I'm tired of being the bad guy.' My solution? Then don't be. Give us the opportunity to build and market this product. Get out of our way, you despicable, Machiavellian old man."

But the posturing goes on (and on and on) while Dave sits with a roomful of air hanging above him, working on the product as best he can. "Getting the product to market is what can really drive you nuts, because in your head it's already done," Dave explains. "It's frustrating to see the product sit while people position themselves. But what's really important is the money we must have to get it done."

"It's getting over that last 2 percent," Dave says. "I'm banked out, or I would do it – I see it. But now, as every potential investor comes in, you have to go over the whole scenario from ground zero. If you can't clearly tell a potential investor the position of everyone in the company, they're gonna say, Hey, that's screwed up. I'm not gonna touch that."

This whole cat-and-mouse game could have been avoided with a quick infusion of venture capital. Even though the VCs would have raped Intaglio on the deal, the start-up would finally get its product to market. But Intaglio isn't just a simple paper business plan anymore. Not by a long shot. It has principles and investors – and with all that, a history. So the process now is far more difficult.

"Engineers look at the product and say, Wow, what a great idea," Chance explains over the phone the next day. "Customers say, We want it. VCs say, We love it. And then they hear about the trouble we're having and they say, Fuck it. We don't need it that bad."

In a way, Chance doesn't either. He's trying on a new job at Broadcast Production Group, a company that has its hands in a lot of different media – film, video, CD-ROM, Internet. Ephriam Lindenbaum, president and CEO of BPG, offered Chance a position as director of international sales and marketing.

"I'm just glad I'm doing something else so I don't have to think about Intaglio," Chance says. "I can't take it. Just look at Dave. He has turned into that Star Trek guy, Data. That's what happens."

And, perhaps only because of their friendship, Dave does view Chance's move through those logical blinders. "If he needs to go with the BPG deal, then he's gotta do it. I can't twist his arm. I can only say, Chance, here's the technology, you can see the opportunity. I'm still looking forward to his participation in Intaglio – at whatever level."

Endgame

It's a few days after tax time, the cruelest month. Chance, Dave, and I meet in the kitchen of Chance's apartment in Los Gatos. There I find out that McNeely has done all he can for Intaglio – he's out. Though he had a new group of investors all lined up, combatting Jim's stonewall over his equity position in Intaglio was too much.

Dave has been talking with Larry Mendoza and has gone to work as a sales consultant for Mendoza's company, Flore Storage Solutions. He'll be selling CD-R equipment, a market Dave certainly knows well. Mendoza also wants to license Intaglio's technology and sell the product through Flore. So, in the meantime, Dave will be hawking Flore hardware to meet the payment schedules on his newly restructured debt with F&S Investments. It's a brutish deal without the flair that Dave hoped Intaglio's introduction would have, but it will get his recording system on the market.

"Yeah, it's a little different now," Chance explains. "But this way Dave can get the product built and finally sell it. Then he and McNeely can focus on new projects."

Jim hasn't kept in contact with Dave or Chance since he left, and he maintains the same stoic front that Dave does when asked about what happened. With his recent promotion to president of Apaq, he's hardly interested in Intaglio anymore, though he perks up when I mention that McNeely has walked. "McNeely said he had money lined up – shootin' his mouth off like he had it."

Jim doesn't spill anything about the stalled negotiations or the tailspin Intaglio has been thrown into because of them. He does, however, let me know that he has been meaning to send Dave a letter to discuss the patents they share on the Intaglio technology.

These newly approved patents are now the linchpin that could immobilize the venture and keep it from ever bringing product to market. Even though Dave engineered the product himself, they both came up with the concept and signed the patent together. With Jim's signature on those patents, Jim can squabble for rights to Intaglio's product and profits whenever he wants.

Since Jim never officially signed on as an officer of the company, he was not held liable for fiduciary responsibility. When you're struggling to make a product and a company, do you have lawyers draft contracts covering sweat equity? If you're smart, apparently you do. And given Dave's bad business experiences in the past, it's surprising he never did.

Everything Jim ever said, once taken as truth, is now beginning to come under intense scrutiny. Dave still doesn't understand what happened with Rickel & Associates. "The logic's real screwy there," he says. "If they questioned our pricing structure, why didn't we get a chance to rebut? You know what I think? I think Jim pissed someone off."

In contrast, the two talk about McNeely in a halo of gold light – like the good witch from The Wizard of Oz. "He had the boat in the water," Dave says, "and everyone's oars were in right except for Jim's."

So they got caught up in Jim's snag; McNeely had to cut the line and walk away. Though Chance and Dave have long made up their minds, it's not entirely clear what sunk the deal: maybe it was Jim's fault, maybe McNeely didn't try hard enough.

"McNeely just couldn't clean this one up," Chance says. "If Dave and I had never dealt with the investors or Jim, we'd be rich. But now, Intaglio is tainted. We didn't know any better."

But as Dave works his way toward finishing the product, a goal he's simply promised himself he'll meet, he's unsure of what will happen once he's finished. Jim is still waiting in the wings with half the patent in his name.

"Jim's not going to go after me now," Dave says, "there's nothing to gain. He'll wait until things are fat and happy and then try something." And though Dave won't reveal exactly how, with the help of his lawyer, he's preparing himself to contest Jim's claims.

Across from me, Chance is staring at the kitchen ceiling. After a moment words come, "You begin to ask yourself: Is this what it takes? Would it be different if it were the Pocket Fisherman? Did the Clapper guy have to go to hell and back to get that thing to market? The mind reels," he says with a sigh.

Dave pauses for a moment, then speaks. "One fortunate thing about all this," he says, "is that Intaglio's still ahead of the market. If I could get the system going 100 percent and get funding in place, then everything would be great."

But the reality, for the time being, is that both Dave and Chance have struck out alone in opposite directions along a circle. They both hope they'll meet at the other side, having corralled everything they need to birth Intaglio once more – this time successfully.

Dave expects that Intaglio's CD-R 2000, in some form, will be at this fall's Comdex, but he's not yet sure how. Still, he's confident that the company will eventually make money and open its doors. After the past year, I wonder what exactly makes him think the future will be any different. I suppose some people just can't work their 9 to 5 and leave well enough alone.

Across the table, Chance is thinking hard into a lukewarm cup of coffee, and I'm expecting him to say just about anything. "You ever see Hellraiser?" he says, looking up from his mug. "You know that box? It's like that. You always want to pick up the box 'cause it holds ultimate pleasure. The box never goes away, someone different just picks it up. And there's always a different Pinhead."

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